Buzzard Swoops to Pick Up U.K. Economy

The UK’s economy has been saved from the dreaded triple dip thanks — in no small part — to the contributions of The Buzzard.

The oil field that bears that name played a significant part in the country recording slender, but welcome, growth in the first quarter. It demonstrated once more the importance of the oil and gas industry to the U.K.’s prospects.

Output from the quaintly named “mining & quarrying” sector, to which oil and gas is by far the largest contributor, increased by 3.2% in the first quarter compared with the final three months of 2012.

During that quarter, a prolonged period of maintenance at the Buzzard field resulted in a disastrous 10.7% drop in output and crushed hopes of quarterly growth.

The Office of National Statistics data show that the 0.3% contraction in fourth quarter GDP was mostly caused by the Buzzard outage.

Buzzard is the North Sea’s largest oil field, and the biggest discovery in the region in the last 20 years. It kicked out a daily average of 160,300 barrels in 2012, but this included a seven-week period – four of them in the fourth quarter – where production was zero.

Further, lengthy shutdowns in the North Sea between January and March would have increased the chances of the economy contracting again. Instead, Buzzard has been running hitch-free with volumes running to export terminals maintaining strong average levels.

To boot, the large Elgin-Franklin natural gas field has come back on stream after a year out. While output there will take time to get back to pre-outage levels, oil form the Forties stream, which includes Buzzard, is running at 425,000 barrels a day in May, double levels seen in October 2012.

The government does recognize the importance of the North Sea to the economy, and is aware of the need to manage the long-term decline that set in in the late 1990s. It introduced tax breaks in September 2012 that have led to record amounts of money being invested, and the continued presence of global players like BP, Shell and Statoil, as well as the recent arrival of China’s Cnooc, are encouraging.

“The oil price is still favourable and there are an increased number of incentives to encourage investment in North Sea exploration and development,” according to Derek Henderson, senior partner at Deloitte in Aberdeen.